The region's markets display the ability to withstand storms.
espite the chaos that Mother Nature rained upon the Southeast in 2005,
the region's markets have persevered through the storms. Florida real estate
prices will rise due to higher insurance costs and taxes, predicts Henry
Fishkind, president of a Florida-based economic consulting company. While
long-term effects remain to be seen, most markets have resisted dramatic
changes. For example, while new multifamily development has decreased in
southern Florida, condominiums still are seen as healthy investments. In Fort
Lauderdale and West Palm Beach, Fla., median apartment prices rose 25 percent
last year to $96,500, according to Marcus & Millichap.
Northern Kentucky quickly is becoming a hotbed for corporate real estate
expansion. Recent developments include Fidelity Investments' new 350,000-sf
building in Covington, Ky., representing a $115 million investment, and FedEx
Ground's $70 million package-handling facility in Boone County, Ky.
The Atlanta industrial market is showing steady improvement. While
vacancy still is relatively high, 15 percent at the end of 2005, an active
leasing market and decreasing speculative construction should lower that
figure. Similar vacancy drop-offs are expected in southern Florida as demand
for biotechnology space in North Palm Beach County increases and Miami
continues to attract investors, predicts Marcus & Millichap.
In Charlotte, N.C., high demand for condominiums has driven the
conversion of apartments and apartment vacancy rates decreased more than 4
percent in the past year according to Carolinas Real Data. Experts predict the
trend will last well into this year.
In Washington, D.C., and northern Virginia, office markets continue to
perform well with rising rents and low vacancies. A recent increase in
speculative office construction in Richmond, Va., has been met with
considerable pre-construction commitments, according to Southeast Real Estate
Business. Demand for medical office space has been especially high in the area.
In South Carolina, retail markets saw increased demand for space and
consistent absorption, according to Colliers Keenan. National tenants that have
saturated other southeastern markets are eyeing lease space in Greenville,
S.C., according to Grubb & Ellis.
Markets will continue to improve throughout the Southeast this year.
Robust activity will continue in the multifamily sector, while retail and
office will follow the flow of job and population growth.
With the decline in the tobacco industry, Lexington's industrial market
finds itself with warehouse space available for redevelopment, Southeast Real
Estate Business reports. Some of these properties have been purchased for
condominium conversion and mixed-use projects. Others will be used by the
University of Kentucky for classroom space or parking lots. Prices have risen
above normal market value due to these properties' development potential.
Lexington's industrial market typically has consisted of distribution
space, but the University of Kentucky plans to attract more technology and
research and development companies. Coldstream, the University's largest
research and development facility, now is occupied by Toyota Motor
Manufacturing and Lexmark International, Lexington's largest employer, among
Lexington was voted the 11th "best place for business and
careers" in 2005 by Forbes based on factors such as operating expenses,
cost of living, and population education levels. Lexington's location near
several major interstates also adds to its appeal. In the last three years,
approximately 74 manufacturing companies have moved into the city, adding
nearly 1,000 jobs and more than $97 million, according to the Kentucky Cabinet
for Economic Development.
Small industrial users especially are active in the Lexington market.
Some are occupying multitenant sites, while others are seeking to buy their own
properties according to Southeast Real Estate Business. Continued absorption is
expected throughout this year.
Hospitality Heats Up
With its historic significance and increasingly metropolitan downtown,
Norfolk, Va., soon will have a new reason to attract visitors. A public/private
partnership is planning a mixed-use development featuring a 240-room Hilton
hotel, 5,000 sf of retail and dining, 70,000 sf of conference and meeting
facilities, and 50 to 60 condominiums. The project, funded by the city of
Norfolk, RLJ Development LLC, and Fulco Development, is expected to cost $104
million. The conference center, as well as a garage, will be funded using $61
million from the city's parking and tax revenues, according to Hampton
Roads.com. The hotel, which will be funded by the development companies, is estimated
to cost at least $43 million.
The Hilton will add to Norfolk's burgeoning hospitality market, which
includes 52,000 hotel rooms and a new $36 million cruise terminal to be
completed this year. Occupancy of the redeveloped hotel is expected in 2008.
Photo caption: Several hospitality developments are planned for Norfolk, Va., including
a new cruise terminal to be unveiled later this year.
Photo credit: Norfolk Convention & Visitors Bureau
Where the rural five-square-mile town of Hardeeville, S.C., once stood a
town larger in both population and acreage soon will exist. A recently annexed
land parcel of more than 18 square miles, formerly known as Argent West and
Argent East, makes Hardeeville one of South Carolina's 10 largest towns in
terms of acreage. The additional land will be developed into a planned
community called Tradition, S.C., adding more than 21,000 new homes and 1,470
acres of commercial space, according to islandpacket.com. Fort Lauderdale,
Fla.-based developer, Core Communities, purchased the land for $41.6 million
and expects the build-out to take several years and phases. The first phase
features a planned community with approximately 1,500 homes and two mixed-use
developments. In total, the land can accommodate up to 9,500 residential units
and 1.5 million sf of commercial space, according to Core Communities. Similar
to the nearby resort towns of Hilton Head Island, S.C., and Bluffton, S.C.,
Tradition most likely will draw a primarily retired demographic
CCIM Market Snapshot
Florida continues its population growth of 1,800 net people per day, and
all major cities are experiencing unprecedented land sales led by residential,
retail, and mixed-use development. Similarly, office and industrial vacancies
have tightened to almost equilibrium levels with an upswing in planned
development for both products in 2006. Investment sales in all product types
are still running red hot with a significant number of trophy properties
changing hands in the last two years.
-Thomas E. Hankins, CCIM,
president, Realty Capital Hankins Group, Orlando, Fla.
Electricity expenses will rise this year due to increasing energy
costs, which may top $1 billion, estimates Juno Beach, Fla.-based FPL Group.
Construction will be affected by rising costs as equipment expenses
increase concurrently. New construction will be further reduced by the labor
force moving into other Gulf Coast cities to participate in rebuilding efforts.
In Miami-Dade County rents
steadily have increased since year-end 2004. In 4Q05 the trend continued as
rents rose to $24.67 psf.
Even though Miami's central business district lost 12 percent of its
inventory in Hurricane Wilma, asking rents rose 0.3 percent and vacancy rates
fell 0.92 percent in 4Q05.
Sources: Studley Report, Codina Realty Services,
CB Richard Ellis
The Parole Plaza Shopping Center revolutionized the way Annapolis
residents shopped when it was constructed in
the 1960s. It was home to
Annapolis' first department stores, meaning residents didn't have to trek to
Washington, D.C., or Baltimore to do their upscale shopping. But, like many
regional malls, the Parole Plaza met its demise in the 1990s and has been
vacant until recently. In December 2005 ground was broken for the Annapolis
Towne Centre at Parole, which will occupy the 35-acre site of the former Parole
Plaza. The mixed-use redevelopment will feature 674,850 sf of retail, 91,700 sf
of office, 90,000 sf of hospitality, and more than 1.2 million sf of
residential, according to consulting company Greenhorne & O'Mara. So far,
tenants include a 140,000-sf Target and a 75,000-sf Whole Foods.
Photo caption: Annapolis Towne Center
Photo credit: Greenberg Commercial Co.
The Department of Defense's decision to move many employees to office
properties on three Virginia military
bases over the next six years will have a profound effect on the
metropolitan area's office market. The DOD currently leases 11 million sf in
northern Virginia, 4 million sf of which is in Arlington/Crystal City, Va.,
representing one-third of the submarket's inventory.
5.2 million sf was delivered through new development in 2005, an 11
percent decrease from 2004. A 550,000-sf corporate center is planned for Prince
William County, representing the trend of offices moving into the submarket to
avoid long traffic commutes.
Vacancy decreased by 40 basis points last year to 10.6 percent. In the
Crystal City submarket, vacancy was 11 percent at the end of 2005, but most
likely will rise as the DOD begins to leave the area this year.
Strong sales rates defined 2005, and the area still is seen as a wise
investment choice. There is stiff market competition with prices rising as high
as $500 psf in areas such as downtown, Capitol Hill, and DuPont Circle.
Rents also are on the rise. Asking rents rose 2.2 percent last year to
$30.66 psf and effective rents gained 2.4 percent to $26.55 psf.
Source: Marcus & Millichap, 3Q05
The 1930s Breakwater and Edison hotels in South Beach, Fla., recently
received a $20 million redevelopment loan to convert the landmark properties
into one condominium-
hotel. The art deco buildings will feature 95 units ranging in price
from $509,000 to $893,000, including a penthouse unit, and renovated pool and
Photo credit: Aztec Group